Baidu Inc. Baidu closed the week at $157.07 on Friday, July 29, 2011. BIDU was up +1.99% for the week, is up +12.09% for July, and is up an incredible +62.72% for 2011. BIDU is -4.44% below the all-time closing high reached on Tuesday, July 26, 2011 of $164.36. Baidu is up an amazing +33.47% in the past 6 weeks, since June 17!

S&amp;P 500By comparison, the overall market, the S&P 500, closed at 1292.28 for the week, and was down -3.92% for the week, is down -2.15% for July, and is up +2.75% for 2011. SPX is up +91.02% since the March 9, 2009 market cyclical low. SPX closed at a multi-year closing high of 1363.61 on Friday, April 29, 2011, the highest close since the June 9, 2008 close of 1404.05, and is now -5.23% below that peak. BIDU is easily outperforming the overall market in 2011. A review of the S&P 500 is here [S&P 500 Drops on USA Debt Deadlock (Chart) *Debt Ceiling Day of Reckoning Imminent*].

Baidu FundamentalsBaidu reported Q2 2011 financial results on Monday, July 25 and are reviewed here[Baidu Reports Record-Crushing Earnings! (Financial Charts) *Astonishing acceleration: EPS +52% QoQ & +95% YoY*]. Previously, Baidu reported near-record Q1 2011 financial results on April 27, 2011, but the bar has been set high for Baidu in the world's largest Internet market. These financial results are reviewed and analyzed on this blog at the Baidu Financial Performance page. This was after record, and stellar, fourth quarter 2010 financial results reported on January 31, 2011.

Price Earnings Ratio = lower 71.94, has been high 90s to low 100s in past year (Google Finance)

Market Capitalization = $54.81 billion (Google Finance)

BAIDU SUMMARY

ConclusionBIDU rallied again this past week and reported record-crushing Q2 2011 earnings on Monday, July 25. Baidu has staged an incredible rally since June 17 soaring +33%! BIDU announced a management and organizational restructure on July 8, 2011, which does not appear to have created any significant investor uncertainty to-date. The bar has been set high for Baidu in the world's largest Internet market and investors are expecting Baidu to report more record financial results in future quarters. The latest Q2 2011 financial results are reviewed and analyzed on this blog at the Baidu Financial Performance page. The intermediate-term trend continues bullish and the long-term trend continues bullish.

DisclosureWe sold our long BIDU position this past week due to overall market uncertainties. We are still bullish on BIDU in 2011.

Baidu News

● Alexa ranks Baidu.com in July as the #1 most accessed Internet site outside of the United States and #6 worldwide (Google is #1 in both categories).● Reuters reported July 19 that there are now 485 million Internet users in China, yet the Internet penetration rate remains low at 36% and the increase of the rate is slowing.● Baidu launched a beta version of its own Internet browser, Baidu Browser?, in July 2011, including a reported 30,000 cloud-based apps.

● Baidu and Microsoft announced July 4 that Bing will power Baidu's English language search in China. Additional partnerships with Microsoft Bing are possible as Baidu pushes for expansion outside of China.

● Here Comes Baidu TV? Following Apple TV and Google TV, Baidu announced July 6 the formation of a strategic partnership with Wasu Digital TV. Baidu services will be pre-installed on the Wasu platforms.

● Baidu wants to be listed on the new Shanghai Stock Exchange international board, as an "A-list" company, when it is launched. No date has been given by the Chinese government for this new stock exchange, which will allow foreign firms to trade Chinese companies in yuan-denominated shares.

● Baidu, as with its USA counterpart Google, has been acquiring other companies, including a 29% interest in Leftbrain (June 23), a Chinese online ratings site operator, and a majority interest in Qunar (June 24), a Chinese online travel reservations and resources service.

● There has been controversy regarding Baidu allowing illegal MP3 music downloads via Baidu MP3, a music search service that allows users to search, stream, and download (copyrighted) music free of charge. Catherine Leung of Baidu stated on May 7, 2011, "Copyrighted music will be the direction of Baidu's music business in the future, and our music-search service will also be based on legal content." The International Intellectual Property Alliance (IIPA), which represents the United States' copyright industry groups, testified at a USA Congressional hearing on Wednesday, May 4, 2011, that Baidu had "serious infringement problems".

● Baidu had a 75.8% search market share in China for the quarter ended March 2011 per Analysys International. Google is second with a 19.2% share. Google has redirected its China traffic to Hong Kong since a censorship conflict with the Chinese government in 2010.

● FWIW Department: Unidentified Chinese residents, as plaintiffs, have sued Baidu and the Chinese government for $16 million in a Manhattan, New York federal court for censoring Internet information. (Zhang vs. Baidu.com Inc., Southern District of New York, Manhattan) China requires websites to self-censor pornography, gambling, and content critical of the ruling Communist Party. No USA court has jurisdiction in these matters and the lawsuit is symbolic, even if a default judgment was obtained. China blocks Google's YouTube, Twitter, and Facebook, among many other websites.

About Baidu

Baidu, Inc. is the leading Chinese language Internet search provider. As a technology-based media company, Baidu aims to provide the best way for people to find information. In addition to serving Internet search users, Baidu provides an effective platform for businesses to reach potential customers. Baidu's ADSs, each of which represents one Class A ordinary share, currently trade on the NASDAQ Global Select Market under the symbol "BIDU".

The Baidu Story

Many people have asked about the meaning of our name. "Baidu" was inspired by a poem written more than 800 years ago during the Song Dynasty. The poem compares the search for a retreating beauty amid chaotic glamour with the search for one's dream while confronted by life's many obstacles. "…hundreds and thousands of times, for her I searched in chaos, suddenly, I turned by chance, to where the lights were waning, and there she stood." Baidu, whose literal meaning is hundreds of times, represents persistent search for the ideal.

Baidu chose a poetic Chinese name because it wants the world to remember its heritage. As a native speaker of the Chinese language and a talented engineer, Baidu focuses on what it knows best - Chinese language search. Applying avant-garde technology to the world's most ancient and complex language is as challenging as it is exciting. At least people here at Baidu think so. As having diligently disclosed in the Prospectus of our recent Initial Public Offering, we believe there are at least 38 ways of saying "I" in Chinese. It is important that we master all the ways of addressing oneself in Chinese because our users depend on us to address every one of their daily queries. And trust us, pin pointing queries in the Chinese language is an art rather than a science.

Our mission is to provide the best way for people to find information. To do this we listen carefully to our users' needs and wants. Have we collected all the Chinese web pages they want to see? Are the pages current and up to date? Are the search results closely related to their queries? Did we return those search results instantly? To improve user experience, we constantly make improvements to our products and services. For example, we introduced "phonetic" or "pin-yin" search which allows our users to type in Chinese keywords using English alphabets. This feature is designed to skip the switching from English inputting to Chinese inputting and for when the user is not sure of the written form of a keyword. Our users definitely notice the many little things that we do differently to ensure a simple and reliable search experience every time.

In addition to serving individual users, we also serve as a media platform for online marketing customers. We not only provide our customers easy access to one of the largest online audiences in China but also targeted groups with defined interests as indicated by queries. Unlike traditional online advertising services which charge by flat fee, our marketing products and services are performance based. Our Pay for Performance model has taken the market by storm because it is cost effective and measurable.

We know that a lot of interesting things are going on in the Internet space, but we don't want to lose focus. China's Internet search industry is only a newly discovered territory. We see vast untapped grounds in our home base and we believe there are still plenty of prizes to be claimed by the best players.

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